An elite educated bureaucracy makes places poorer...

Or so some research seems to show....

I use a natural experiment to show that the regions of China with over a thousand years of sustained exposure to state-building are significantly poorer today. The mechanism of persistence, I argue, was the introduction of a civil service exam based on knowledge of Confucian classics, which strengthened the social prestige of the civil service and weakened the prestige of commerce. A thousand years later, the regions of China where the Confucian bureaucracy was first introduced have a more educated population and more Confucian temples, but lower levels of wealth.

The crucial point here is about prestige - in a world where the high prestige professions are non-commercial, the endeavour of the brightest to secure that prestige undermines economic development.

Much might be said about the situation in Europe where, increasingly, high prestige jobs are to be found in non-commercial environments, what Deirdre McCloskey calls the "clerisy" - academia, medicine, think tanks, central bureaucracies and a host of grand jobs in what might be called the international third sector. Even within the world of commerce, the prestige lies either with performers or with the administrators of large business systems - we are encouraged to see the creators as the parasites not as the means to provide the goodies society wants.

Thus the debate around the rich and successful isn't, "wow, how can we get more people like that creating value for society" but rather, "why aren't they paying more tax so more of us in prestige jobs can have more power and money". We're more bother by the relatively unimportant question of whether entrepreneurial businesses are paying enough money to the state rather than how we can support them (and others) to deliver more social value through that enterprise, innovation and creativity.

The lesson from history - the Dutch republic, Britain in the 18th century, the USA after the civil war, and places like Hong Kong or Singapore today - is that when doing business is valued by society and those leading is have the highest prestige then economic benefit to everyone is greatest. Sadly, we're in a time where entrepreneurship is disparaged, doing business is characterised as exploitative and non-productive, non-commercial roles are seen as the most important, most privileged.

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If there's a global technology race, Europe is going to lose.

This is clear from an interview in Der Speigel with Pedro Domingos, author of 'The Master Algorithm' (which, we're told sits on Xi Jinping's bookshelf alongside Marx and Mao):

My literary agent told me: "You are going to sell this book all over the world, but not in France and Germany." And that's what happened. "The Master Algorithm" was sold to Japan, China, Taiwan, South Korea. There are Polish and Russian translations. But my agent was right when he said: "The Germans and the French don't like these things."

There still isn't a German translation of the book and it's because the Europeans are terrified of technology's implications:

The picture coming out of Silicon Valley is a very optimistic one, informed by libertarian ideas. The very opposite is true for Europe: I just came back from a conference in Berlin where I was struck by the sheer pessimism. Every other session was about: "Oh, we have to fear this. Who knows what may be going on here?"

This technology - Artificial Intelligence - is our future economy, it is our escape (if Silicon Valley's libertarianism wins over Jinping's autocracy) from being what sociologist C. Wright Mills called The Cheerful Robot back in 1959 (if not it's a world more like Taylorism on steroids - Zamyatin's 'We'). Yet European governments are closing the doors to the idea - from proposals for limits on robots to government access to commercial algorithms the EU and other European governments are set against the idea of a liberal, free market artificial intelligence.

Here in Britain it's not much better with the recent Facebook / Cambridge Analytica sessions, the House of Lords' risible report on AI regulation, the febrile 'we're being spied on by evil capitalists' line of national broadcasters and broadsheets, and a government that can't see how giving the state access to encrypted messaging makes that messaging useless.

We need a debate about the risks and benefits rather than about how we can control the technology - what are the downside risks of unregulated commercial AI set against the upside benefits of giving technology innovators free rein? What, as Domingos comments, is the balance between 'explainability' (this is what the algorithm does) and effectiveness?

Right now Europe, for all its brains and corporate clout, is dragging its heels and, worse, has a government in the EU that is actively opposed to both a liberal US-style technology surge and an autocratic Chinese-style approach. Whoever wins this battle, it isn't going to be Europe.

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Things we forgot to invent...

Charles Chu reflects on Gene Wolfe's observations about things we forgot to invent. Before we start, if you haven't read Gene Wolfe's 'Book of the New Sun', you've missed a real treat.

Chu cites wheeled luggage (or rather cites Nassim Taleb's insight), invented around 1970 and not widely available until some time later. Something as mind-bogglingly obvious as sticking wheels on luggage somehow got missed in the 3,000 years between the invention of the wheel and those pioneering wheeled suitcases.

This was Wolfe's realisation - some things like, for example, the hot air balloon got invented a lot later than their simplicity and logic suggest. Wolfe also spotted that somethings got invented more than once (steel smelting - invented in the 5th century BC in China and then again in Britain in the 19th century):

“They had indoor plumbing in Ancient Crete. It was lost with the fall of that civilization, and did not reappear until long after it was needed. A model airplane, carved from wood, has been found in an Egyptian tomb. (Don’t get me started on the Egyptian girl wearing sunglasses.) Electroplating seems to have been invented at least twice. And so on. I decided to put the hot-air balloon in the Dark Ages, and I threw in a few other things too. Thus the story you have just read. Was there ever a time like that? No. Could there have been? Certainly.”

We think of invention as a sort of linear process where x leads to x+ and so forth. The reality is that, not only does x quite often go straight to x++++ but it's a long time before some clever human backtrack to actually invent x+.

In speculating about how we create the right environment for invention, Chu suggests that instead of throwing loads of cash at posh research and development we should do what every bloke with a shed knows:

The answer, then, may not be to pour more funding into R&D. Rather, we should encourage tinkering — we need to repeat many rounds of random, playful and curious trial-and-error to actually discover the amazing ideas that are sitting, invisible, right in front of our faces.

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So the Chinese are buying up Sheffield. Tell me economic nationalists where's the outcry?

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You'll all recall the outcry - much of it pig-ignorant - over the sale of ARM Holdings to a Japanese company. Between people blaming Brexit and a veritiable torrent of slightly leftish economic nationalism we were told that this was a terrible foreign take over. Maybe it is, maybe it isn't (I lean towards the latter - after all I'd be cheering on a British business buying a Japanese company why not the reverse).

What I don't understand it the selective nature of this economic nationalism. I've not picked up anything like the same sort of negative response to this:

In the biggest Chinese investment outside London, Sheffield city council announced that an initial £220m would pay for four or five city centre projects over the next three years and create “hundreds if not thousands” of jobs in south Yorkshire.

The partnership is between Sheffield city council and Sichuan Guodong Construction Group, one of the biggest firms in China’s south-western Sichuan province.

What, dear reader, is the difference between a massive Chinese conglomerate buying up big chunks of Sheffield city centre and the (admittedly larger) inward investment deal that was the ARM takeover? Or for that matter the perennial whining and whimpering about foreign investment in London property? I mean, if you're going to be an economic nationalist - adopt the daft Will Hutton view of industry - then, for heaven's sake, be a consistent economic nationalist.

What we have here is a massive Chinese investment in UK property - celebrated by The Guardian. Just the sort of thing the same paper was railing against a short while ago:

Foreign buyers now own close to 10% of the UK’s housing stock, he claims, and, unchecked, will gobble up much more, increasingly in Manchester, Edinburgh and other regional cities. With the global financial elite numbering at least 15 million, “increasing housing supply can never bring down prices, no matter how much public land and green belt is turned into flats, because the demand for investment returns is almost infinite.”

Thes epeople really do need to make their minds up. Just because this is a snuggly deal between a Labour Council and a big Chinese corporation (with all the lack of accountability that goes with this sort of deal) doesn't make it special or better - it's just as much foreigners buying up British assets as the ARM deal or a thousand other mergers, property investments and stock purchases. All in all a reminder that economic nationalism is stupid.

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Public health warnings as social engineering - the case of 'Himalayan Viagra'

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The Chinese government public health authorities have issues warnings about the safety of cordyceps sinensis (better known across Asia by its traditional Tibetan name, yartsa gunbu, which literally translates as "summer grass, winter worm).

...a handful of noted research scientists wonder why there’s been such little scrutiny of the research backing a public health warning from China’s State Food and Drug Administration (CFDA). Citing unsafe levels of cancer-causing arsenic in the fungus, the February 2016 announcement triggered a moratorium on pilot programs designed to expand the organism’s commercial development and distribution.

Connoisseurs of public health research with see a familiar litany of bad science in these announcements - selective research, ignoring studies that challenge the official position and a barrage of popular publicity directed at the offending product. And some suggest the reason for the government's concern is political, more about social engineering than public health. Gathering yartsa gunbu - 'Himalayan Viagra' - is a lucrative business:

According to one yartsa gunbu dealer who asked to remain anonymous, a family with good harvesters stand to make as much as 1,000,000 yuan (about $150,000) within the two month harvest window.

A lucrative business entirely controlled by ethnic Tibetans. And the Chinese government might prefer these people not to control a $1billion business selling weird fungus products to gullible Chinese consumers. So long as Tibetan families with the knowledge of where and how to gather yartsa gunbu are able to live in traditional communities rather than the government's preferred urban environment some suggest there will remain a call for independence.

Or else it could just be another example of a few studies providing the justification for out of control health authorities to ban, limit, control and regulate. The good news it that, so far it ain't working:

Whether any political motivations are driving the Chinese government’s claim to public health concerns about the fungus is yet to be seen. But Professor Tsim, who continues evaluating soil samples, says any regulatory action on the fungus inevitably affects the livelihood of Tibetans. The CFDA announcement has yet to impact Hong Kong prices, he said, and one eBay seller recently posted the fungus for about $78,000 per pound.

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Friday Fungus: the economics of Himalayan mushroom foraging

The Yartsa Gunbu (Ophiocordyceps sinensis) is a weird little fungus that infests a species of Chinese caterpillar eventually growing out from the head of the creature. It is cherished in Chinese medicine and, if you're writing tabloid headlines, the term 'Chinese viagra' is recommended.

The problem is that, as China has got richer, these prized traditional medicines have got ever more prized and ever more expensive. And the Yartsa Gunbu isn't farmed but foraged - this is hunter gathering. So it presents a problem - as Tim Worstall (slightly polemically) puts it:

There are those out there who think that we should return rather to our hunter gatherer roots. Simply pick from nature’s bounty rather than intensively farm the planet. There’s really only one problem with this delightful idea: we’d all starve within months having stripped the Earth of everything edible

Indeed this is very much an issue with Yartsa Gunbu especially given how important it has become for the economy of part of Nepal, Bhutan and Tibet:

With an eight-fold increase in value from ¥4,800 to ¥40,000 per pound (Winkler 2008b: 18) yartsa gunbu has become the mainstay of household economies across the Tibetan Plateau and in the highlands of Nepal, India, and Bhutan. It fills an economic void in Tibetan areas of China that state-sponsored development projects, which tend to focus on infrastructure, do not always satisfy.

So it's no surprise that there are reports of violence, extortion and criminal activity linked to the collection of this valuable product. Plus suggestions that the high prices lead to over-exploitation and the destruction of future production. So it is interesting to see how different communities have responded to this situation and to the threat of over-exploitation. In some areas the Yartsa Gunbu is found on land that is in existing private (or local village) ownership and, as a result the harvest is leased out by the land owner who secure the income in rent rather than by selling the fungus. Elsewhere a controlled number of permits are issued to outsiders and they are limited to specific locations.

However, Geoff Childs and Namgyal Choedup in an article in Himalaya report on two areas that use a different regulatory method to control the exploitation of the Yartsa Gunbu:

Using data from household surveys and in-depth interviews, the authors describe the process of gathering and selling yartsa gunbu within the parameters of management practices that combine religious and secular regulations over natural resources. The authors conclude with a discussion of the indigenous management system in relation to sustainable development.

The review concludes that regulation limiting collection is essential - what different communities have done is limit who can collect and when they can collect. Some, such as the places studied by Childs & Choedup, use traditional controls (religious tradition, inherited collection rights and regulation of collector behaviour) whereas others use more 'modern' approaches such as licensing, permits and leases to limit collection and provide incentives to protect the long-term supply.

The lesson of this is that, for all our modern urban idolising of wild foraging, this practice is pretty bad news for the environment if it is not controlled. As we see with UK demand for wild mushrooms (all that soup and pasta in all those gastro-pubs) and other foraged goods, the result is a problem:

Epping Forest, an ancient woodland straddling the border of greater London and Essex, is one of the best fungi sites in the country, with over 1,600 different species. But, like other fungi-rich sites such as the New Forest, it is being stripped out by illegal picking by gangs believed to sell the wild mushrooms to restaurants and markets

Perhaps rather than - as has happened in Epping Forest - simply banning foraging, we should pay a visit to Nepal and look at how they manage their harvest of an (admittedly pretty odd) wild mushroom.

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Himalayan viagra - an odd story of libido, caterpillars and mushrooms

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This is the tale of Ophiocordyceps sinesis or, if you're more poetic, the Mysterious Caterpillar Mushroom or even, as the Chinese name it - Winter Worm, Summer Grass:

It preys specifically on the larvae of several species of ghost moths in the Thitarodes genus. Spores infect the larvae while they live underground before pupating. The spores germinate and mycelium grows, killing and mummifying the larva/caterpillar. Eventually a fruiting body grows from the mummified larva and pops above ground, reminiscent of something from an awesome science fiction movie. 

So there you have it - a weird mushroom that grows from out of a dead caterpillar's head. And the Chinese can't get enough of it because it is believed to do great things for the immune system and (hence the Himalayan viagra tag) treat erectile dysfunction. And, not surprisingly, the result is that this wonderful little ecosystem is threatened by overharvesting:

“There is a similar trend in other Himalayan countries, such as China, India and Bhutan,” says Liu Xingzhong, a mycologist in the Chinese Academy of Sciences’ Institute of Microbiology in Beijing. On the Tibetan plateau, for instance, the fungus harvest per unit area has dropped by 10 to 30 percent compared with three decades ago....

In one respect, this problem is a reflection of how the myths of libido are so rapacious. This little mushroom may not be as grand as a rhino or as magnificent as a tiger but its decline is for the same reason - the sex drive of Chinese men. But, just as with those great wild mammals, the heart of the problem is the tragedy of the commons - up on the Tibetan plateau no-one owns the places where the caterpillars and their mycological hosts do their thing. And the result is overharvesting and fights over 'territory'. As collectively-owned places, Chinese national parks provide no incentive to limit either the amounts harvested or the numbers of harvesters.

 

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After the Bitrush - a comment on the politics of money

Well, I dreamed I saw the silver
Space ships flying
In the yellow haze of the sun,
There were children crying
And colors flying
All around the chosen ones.
All in a dream, all in a dream

The predictions - oh yes, the predictions! Everywhere we see them, all giving their take on the future of money following the remarkable growth of Bitcoin.

But first let me tell you of a little story. It's not my story, it's Neal Stephenson's story. And it's the story of in-game money and the way that money (and assets created in the game by that money) 'leak' into the real world. Moreover, like Bitcoin's recent ups and downs the focus is on China and the desire of rich Chinese folk to get round their government's tight control of money leaving for other countries.

Remember folks that this desire is real - it actually happens. Here's something from an article back in 2006:

In one extreme case last year, an online gamer in Shanghai killed another player who had taken his cyber-weapon, called a Dragon Sabre in the popular online game Legend of Mir III, and sold it for 7,200 yuan (US$871).

The gamer almost forfeited his real-world life for doing so when he was handed a death sentence with a two-year reprieve.

Still, Tencent spokeswoman Catherine Chan said in a written statement that the company's virtual money did not pose a threat to the real-world economy.

Q coins were created to work as tokens for the consumption of the company's online services, and the Q coin "is definitely not a currency," she said.

All sounds a bit familiar, eh? And, if the bubble theorists and tulip fans are right and Bitcoin falls over, there will be another way for people to circumvent the nosiness of government. Another on-line system - call it a currency or an exchange system, maybe even a game, it doesn't matter. People will use it to get round the arbitrary controls governments place on our actions.

Ms Chan, quoted above, is right - virtual money isn't a threat to the real-world economy, it's a threat to government. Hence the concerns about taxation and the polemics about Bitcoin being evil. I would therefore leave you will an alternative view - not from some techno-whizz or Randian obsessive but from Hayek:

"We have always had bad money because private enterprise was not permitted to give us a better one.  In a world governed by the pressure of organized interests, the important truth to keep in mind is that we cannot count on intelligence or understanding but only on sheer self-interest to give us the institutions we need.  Blessed indeed will be the day when it will no longer be from the benevolence of the government that we expect good money but from the regard of the banks for their own interest.”

Those who believe that the only safety is the safety of government guarantee are wrong - cruelly wrong. This supposed guarantee is a fraud, corrupted by inflation and fed by the need of bureaucracy to fulfil Parkinson's Law.  It doesn't matter whether or not Bitcoin is a good investment, whether it is safe or whether other people use it for illegal acts. It really doesn't matter because the stopper is out of the bottle - the genie of liberated money is out of the bottle and is a weapon for those who would tear down the castle.

How we respond to these changes will be a measure of how much we want liberty and whether we prefer choice to government edict.

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Density and intensity...about the modern city.

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This is Shanghai from Rob Whitworth on Vimeo.

OK it's a great video intended to show the City at its best, it doesn't include the dark side, the bad buildings, the deprivation, the people without papers living on the fringes of developments. But it shows a city that's alive - buzzing with activity and opportunity (often despite the preferences of the stifling People's Republic bureaucracy).

Contrast this with the images we see of Detroit - emptyness, dereliction, inactivity and a poverty of spirit that seems to scream out; "there is no hope."

Whatever we do to make our cities work, it's clear that density and intensity are essential. And that this doesn't come from the managerialism of government, from licenses, controls and taxes. As one observer points out about Detroit:

[The] per capita tax burden on City residents is the highest in Michigan. This tax burden is particularly severe because it is imposed on a population that has relatively low levels of per capita income.

The City’s income tax… is the highest in Michigan.

Detroit residents pay the highest total property tax rates (inclusive of property taxes paid to all overlapping jurisdictions; e.g., the City, the State, Wayne County) of those paid by residents of Michigan cities having a population over 50,000.

Detroit is the only city in Michigan that levies an excise tax on utility users (at a rate of 5%). 

The answer - or perhaps something that just gives cities a chance to succeed - is to allow them to chop taxes, to tear up regulations and to prefer that crowded wonder of the market to deliver growth. The secret lies in allowing people to do things rather than finding reasons to stop them. To let people have the fruits of their own success to spend, to invest, to play with. And to eschew the planning and second-guessing that municipal authorities so love.

In Shanghai there's a fantastic model of the city showing how it will be in the future. However, almost from the moment of its completion this half-acre model was out of dat - no maglev, no new city and a seemingly endless parade of identical tower blocks. Shanghai show that, even with planning, a city can fight back and deliver growth, change, innovation and excitement.

The most frightening thing here is that we see pride, excitement, dynamism and change in China - a communist state - and dereliction, destruction, depression and decay in the land of the free. And that should be a wake up call to us all.

However much we wish to pretend otherwise, too much of our 'regeneration' does not work.

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Capitalism works and we should celebrate

After all there's an International Workers Day, why not an International Capitalism Day.

Here in England we've got rather used to being told just how bad capitalism is. And how a decent society is only possible because of the control and regulations placed on that capitalism by the benevolent hand of the government. There's sort of a point to this argument - it justifies government (and the millions it employs to administer those controls and regulations) and it reminds us that we can never be completely free.

But what is missing in all this is a celebration. Something that recognises just how fantastic capitalism has been for us, how it allowed us to escape from the bitter toil of subsistence agriculture, how is gave us wages to spend and, in time, a surplus from those wages to spend on pleasure. We seem to have forgotten just what capitalism did for us.

Fortunately, we get a glimpse still of capitalism's wonders:

"There have been big changes," she said, sitting in her office on an industrial estate 20 miles from the city's market. "Yiwu is changing every year - new buildings, new markets, new products and also many new customers." Yu Hexi, 52, the manager of Yiwu Beautiful Life Flower Co. Ltd a local firm that makes the imitation flowers that adorn the heads of women across Europe has fared even better.

"I never imagined, or even dared to imagine, that I would enjoy such a good life now," he said. His parents were once part of a rural Communist production team. Now, he runs a company with an annual turnover of more than half a million pounds.

"When I was little, we were really, really poor. My parents were peasants.

We didn't have enough food. Now our family has three cars. We built the best house in our village.

Multiply Yu Hexi's experience a million times and you get an idea of what capitalism is doing for China - and, because we're buying the things those Chinese businesses are making - for us too.

But it's not just the people who run the businesses, it's the workers too:

"There have been big changes in recent decades," she added, without pausing from her packing duties on the production line. "The city is getting better year after year. The most important change for me is that more factories are bringing more job opportunities." Shen Youfeng, 52, who works in the factory alongside her 18-year-old daughter, Feng Xueqing

More jobs, rising wages, the benefits of urban life and the chance to progress through education, hard work or both. This is what that capitalism brings to China and what we should be celebrating because we only have those things today because of capitalism.

The evidence of the last three decades - a time of unprecedented improvement in the lives of the world's poorest people - tells us that the idea of a free market, of free trade and of capitalism provides the sort of social and economic improvement we want for everyone. Yet we never pop open the champagne corks or put out the bunting to celebrate what free enterprise and free trade has brought the world.

If you want to reduce poverty then go buy things made by poor people in poor countries. And this is also why everyone who is even vaguely lefty in outlook, even a tiny bit concerned about improving the lot of the poor, should be pro-trade, pro-globalisation, in short, should be neoliberal capitalist running pig dogs intent on exploiting the labour of the poor.

And the reason for this is that it works.

Every other approach to improving the lives of the poor has failed. Every single one from socialism, fascism and communism to import substitution behind trade barriers and the grand state approach so loved by central African despots (and their French sponsors).

Capitalism may seem "unfair" - some people got pretty rich - but the deeper truth is that this unfairness is a chimera, a distraction from the real business of globalisation, free trade and free enterprise. And that business is making us all better off. Not just in economic terms but in every measure of human development. Free enterprise and free trade really do make our lives better. Every time.

Capitalism - free enterprise, free trade - made us rich. It's making the Chinese rich. And it will make Africans rich. Let's celebrate it just for once.

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...reminding us why the City of London is so important to Britain

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From Mr Peston:

Talking to bankers and lawyers, there is growing optimism that the City of London will join Hong Kong as an offshore centre where the Chinese currency, the renminbi (RMB), can be traded - and that an announcement on all this may not be far off. 

If that were to happen, it would be quite a big deal - and would be the culmination of talks between the UK Treasury and the Chinese authorities that are said to have made significant progress on this issue last autumn. 

More export earnings for London showing yet again how important it is to our economy:

One City figure close to the talks told me he thought there would be a billion pounds of extra business and significant new jobs created almost overnight. 

Stick that in your pipe, Occupy London and the other 'banker bashers'.

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The Space Age is Over...Long Live the Space Age!

In one of those well-informed polemics that The Economist does so well, we are told that the ‘Space Age’ is over:

Their dream was for man to venture farther into the solar system and beyond, into interstellar space. Many people feel that these imaginings have been dashed. It is quite conceivable that 36,000km will prove the limit of human ambition. It is equally conceivable that human space flight, long the stuff of science fiction, will return to fantasy.

Just maybe. And just as maybe The Economist are wrong to be quite so sniffy about private initiative:

...the private ventures of people like Elon Musk in America and Sir Richard Branson in Britain, who hope to make human space flight commercially viable. Indeed, the enterprise of such people might do just that. But the market is uncertain. Space tourism is a luxury service that will probably not to go beyond low-Earth orbit. And ferrying satellites and other kit to the Earth's extended "technosphere" is hardly boldly going where no man has gone before.

The assumption in all this is, of course, that the conquest of space – the stretching of that final frontier – is something only possible with the resources and leadership of governments. And the statements about a “luxury service” are achingly reminiscent of the famous comments from crystal ball gazers about telephones (one per town), computers (a world market of five or six) and much else that is innovation.

For the record, Simon’s prediction is that we do indeed have a new space race, it will involve the commercial exploitation of space and it is between the western entrepreneur and the state-directed exploration of the Chinese. It’s likely that the moon’s next human visitors will be either western tourists or Chinese miners.

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Over to you Africa...

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"We are still getting orders from abroad, all the factories are," said Wei. "But no one is taking them because we would make a loss. The foreigners do not want to pay a reasonable price. We have not made any profits for two years."

 So reports the Sunday Telegraph in a piece about the impact of economic growth, higher wages and cost pressures on Chinese clothing manufacturers. And the big deal here is that the businesses can't produce the clothes cheaply enough to satisfy the cost demands of Western brands and retailers.

Now, however, the Chinese factories have hit a wall. The workers who were once happy to work for as little as £30 a month now want ten to 15 times that sum.

Young men with the latest mobile phones and foppish hair cuts stood around two outdoor pool tables on the streets of Dadun avenue, gambling on the games. Their factory is only paying them for six hours a day in a bid to trim its costs.

More and more workers are choosing not to travel to the South to find work, preferring to try their luck at one of the new factories or construction projects popping up in inland China, where life is cheaper and they can be closer to their families.

Familiar? Yet the first response is to suggest that the answer is for us to pay more for our jeans!

The days of so-called "throwaway fashion", where stores could sell garments cheap enough to be worn for a just a few months and then discarded, could be over, he said.

"Companies should be very scared, as throwaway fashion is now dead," he claimed. "For years they wanted to get more and pay less. They have pillaged the system in China. But now they are going to suffer."

Elsewhere in the world there's a huge continent with millions of people crying our for economic opportunity, crushed by the agricultural protection of Western democracies and patronised by aid NGOs.

It's called Africa - I reckon they'd be pretty good at making jeans? Don't you?

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The coming economic winter - quantitiative easing, inflation and the crashes that are yet to come...

An economic winter is coming.

There are two business columnists in the Sunday Telegraph who I always read – and who seem often to be describing a different world. Such is, I know, the stuff of economics and finance. For every economist saying one thing we can find you one – or even 364 – who disagrees. Such is the case with Liam Halligan, Chief Economist at Prosperity Capital Management and Tom Stevenson, Investment Director at Fidelity Investment Managers (the two columnists).

So when they say the same thing we should take notice. Here’s Liam:

“That’s why QE (quantitative easing) will be blamed for so much more than “unfair” currency devaluations and for imposing a “soft default” on America’s creditors. This crazy money-printing is going to be seen as the primary cause of western inflation, food riots and a commodity price spike.”

All pretty polemical and typical of the Halligan style. Instead we can have Tom’s more measured, investment-advice:

“This is the so-called “Bernanke put”, whereby investors believe that if the worst comes to the worst the Fed’s helicopter will simply drop a load more newly printed dollar bills to bail them out.”

All told pretty high falutin’ stuff – not for the likes of us peasants toiling at the computer face. And, like the proverbial boiling frog (which on this occasion has nothing to do with Denholme), we’re not going to notice until it’s too late. We’re not going to see how our Governments – in a deliberate act – have set on a course of creating inflation so as to reduce the real deficit. It won’t hurt.

Or as our friend Liam puts it:

“So, in other words, QE has benefitted some pretty formidable interest groups – insolvent banks, public sector unions and cowardly politicians.”

The one group who emphatically do not benefit from QE is that group containing people without large debts, people living on fixed incomes, those reliant on savings, pensioners…in fact most of the population.

And what is worse is that QE isn’t working.

Far worse than that, the short-term, selfish decision to protect banks and the public sector now threatens to see a return to managed trade, to protectionism and to the misery of international stagnation – even depression.

“The US last week stoked the simmering tensions by unveiling plans for another $600bn (£370bn) of quantitative easing (QE) on top of the $1.7 trillion already in place. The dollar crashed in what is being seen as the latest round of competitive devaluations, as nations seek to debase their currencies to help domestic industry.”

With this comes calls for limits on current account surplus (oh, to have one of those!) – limiting it by agreement – to 4% of GDP. Or at least calls from the US:

“Geithner last week sought to "reach a common understanding" with proposals that are likely be at the centre of discussions in Seoul. He raised the prospect of using current account targets as a way of reducing the imbalances, suggesting a 4pc of gross domestic product (GDP) benchmark. Under his plan, countries with persistent deficits would have to boost savings and those with lasting surpluses would have to cut export reliance.

Unsurprisingly, both China, with a 4.5pc surplus, and Germany, with a 5.1pc surplus, would have to take immediate action. In a damning riposte, Cui Tiankai, a Chinese deputy foreign minister, said the US plan harked back "to the days of planned economies".

It has become a strange world when the Chinese Deputy Foreign Minister is lecturing the US about the dangers of planned economies and managed trade.

At some point we have got to make the banks fess up – get them to lay out the extent of their liabilities on the table and let a few things die. So long as US and UK central banks protect their financial industry through QE – and it’s for the banks interests not ours, dear reader – we face the prospect of a new inflationary bubble in stocks, property, commodities or even tulips that will drive another economic crash.

An economic crash that will be accompanied by managed trade, protectionism, destabilising tax increases and untold suffering for poor people everywhere.

It may not be a good investment strategy not to fight the Fed. But it’s good politics – we should fight the Fed all the way to a world economy based on making, doing and trading things rather than on the fiction of central banker control. Those central bankers – urged on by the panjandrums of the public sector (who wish to protect their sinecures) – are favouring their friends at the expense of those who do that making, doing and trading. And this isn’t just bad economic policy, it’s just plain wrong.

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Bamboo....

Thought I'd share with you some thoughts about scaffolding - or possibly about bamboo since in Shanghai where I took this picture that is what the scaffolding is made from. Which - to our health & safety obsessed eyes at least - seems a pretty dodgy material to use during the construction of skyscrapers in an exciting modern city! But this is how it works:

In Asia today people still practice the ancient yet evidently effective method of traditional bamboo scaffolding. Workers build frames of bamboo which are durable enough to support the weight of themselves, their equipment and materials while they work. Simple as these structures may seem they are by no means limited. It is still a common sight to see these bamboo structures spanning the entire height of buildings and office blocks.

It is simply a different technique. However, Chinese studies seem to indicate that bamboo scaffolds - despite other advantages in portability, sustainability and flexibility - are inherently more risky than metal scaffolds (between 60% and 80% higher risk). As a result Chinese authorities (as well as those in Hong Kong and Taiwan) are seeking to 'phase out' the use of bamboo scaffolds.

Which would be a shame for us tourists if not for the poor construction workers!

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